Cryptocurrency – How Liquid is the Market?

Cryptocurrency – How Liquid is the Market?

Cryptocurrency is virtual currency that uses encryption for security. It is stored in the blockchain, which is a decentralized ledger of all cryptocurrency transactions that have ever been executed. Cryptocurrency is evolving at a tremendous pace. Bitcoin, the first cryptocurrency, was introduced in 2009. Initially, it had little or no value; today, it stands at an exchange rate of approximately $4,000 per coin.

Liquidity

Liquidity is defined as the ability of an asset to be converted into cash, on demand, without any difficulty. In the case of cryptocurrency, liquidity translates into how easily it can be bought or sold for exactly the worth it has, i.e., without any need for discounts. A low liquidity level means the market is volatile, which causes large spikes in prices of cryptocurrency. In contrast, high liquidity represents a stable market, where price fluctuations are minimal.

Exchange Network

Key to understanding the liquidity of the cryptocurrency market is determining whether a strong and trusted exchange network exists – a place where virtual currency like Bitcoin can safely be converted into cash.
The first Bitcoin trade exchange was launched in 2010. Today, there are more than 50 trusted exchanges in existence. Among the most prominent of these platforms are Bitstamp, Bitfinex, Coinbase, Bithumb, Poloniex, and Kraken. Users can buy, sell, and store cryptocurrency on each of these trade exchanges, all of which are highly secure, given the very nature of cryptocurrency.

Trading Volume

The volume and frequency of cryptocurrency trading are the major factors determining the liquidity of any market. The trading volume for all cryptocurrencies combined hit $124.8 billion in mid-September 2017. At the same time, the 24-hour cryptocurrency trading volume witnessed a new record, crossing $11 billion for the first time. In 2009, there were only 50 Bitcoins in circulation; as of mid-September 2017, there are more than 16.6 million in circulation.

Acceptance

Cryptocurrency liquidity is primarily dependent on how widely virtual currency is embraced by various networks. Bitcoin and other cryptocurrencies are rapidly gaining acceptance as a mode of payment, particularly by the online stores. As of mid-September 2017, acceptance and use have risen almost 800%. Today, more than 370,000 vendors across 182 different countries accept cryptocurrency, including U.S. giants like Amazon, Dell, IBM, Microsoft, Apple’s app store, PayPal, eBay, Home Depot, Zappos, Target, Gap, Kmart, Sears, Netflix, Expedia.com, Overstock (which has the distinction of having been the first major U.S. retailer to start accepting Bitcoin as payment for its goods), and many others.

Regulations

Liquidity is also indirectly affected by the position taken by governments toward regulating cryptocurrency. Although Bitcoin is majorly traded throughout the world, there are countries where dealing in cryptocurrencies has been banned. This has an adverse impact on liquidity. Fortunately, cryptocurrencies are already a highly recognizable asset, one that is exponentially gaining momentum as an accepted form of payment.

Strategic Coin is your go-to source for crypto market research insight and education. Whether you need help understanding the basics of blockchain technology or desire to read an in-depth analysis of the latest ICO or token launch, Strategic Coin will provide you with the information you need to take advantage of market opportunities within the crypto space.

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